Getting Referrals Right

Brokers are always looking for new clients. Some just happen to look in the wrong places. There is a better and easier way to fill the “prospect pipeline”. How do you get sales leads? There are only so many strategies out there, and brokers have tried (and had limited success) with a number of methods. How about waiting for walk-ins or call-ins? Considered “smiling and dialing,” particularly close to renewal dates? Direct mail?

Many people refer to prospecting as “the dirty work” in the sales business. And it can be dirty when you look at the average hit rates and closing ratios for brokers. We know from experience that direct mail yields a hit rate of 1%-3%, while walk-ins or quote callers garner a not much more respectable 5%-10%. Even aggressive telemarketing results in at a 10%-15% closing ratio. Basically, that is a lot of energy spent on little end production.

ROPING IN

There is, however, a strategy that makes a lot more sense. We call it the “referral only production explosion”, or ROPE, for short. The premise is simple – build into your brokerage a system of asking your best clients for referrals.

Most brokers or account executives recoil at the thought. Asking for referrals can be almost as daunting as making your first sales call. Some think asking a good client for a referral is “below them”. For whatever reason, brokers and account executives in today’s marketplace have not tapped the true potential of referral-based business. This potential can be quickly realized when you look at closing ratios. But let us first define our terms. We define closing ratio as the percentage of new business written per client presentation. A presentation is not a phone call or a quote on a walk-in, but instead an in-person discussion of a client’s insurance needs and explanation of how your brokerage can meet those needs.

Our consulting experience with brokers show that targeted referrals from good clients result in closing ratios of 60%-80%. Some brokers have achieved rates as high as 90%. That is a pretty good return on time and investment when it comes to marketing and prospecting efforts.

REFERRAL ETIQUETTE

There is a “right way” and a “wrong way” to ask for referrals. Many brokers do it the wrong way. They awkwardly ask a client for names and numbers of friends, relatives and colleagues, expecting a torrent of hot leads. This rarely happens. Clients, even if they are good clients, are not sitting around waiting for you to ask them about referrals and other potential sources of new business.

A better method for getting referrals is “reverse referral strategy”. Part of this strategy involves preparing a list of names and businesses that are in your client’s industry and then asking him or her to help you separate the wheat from the chaff. Your request is simple: “I am looking to write more business in this industry. Do you know if any of these are good companies and whether I should approach them?”

In this sense, the work is already done for the client – he/she does not have to think of a bunch of names on the spot. Indeed, the client may take it as a matter of professional pride to give you his or her opinion on leaders and respected firms in the industry.

CLIENT SUPPORT

Furthermore, if your client is an advocate for your brokerage, there could be another big benefit to the reverse referral process. And that is a letter of endorsement, or even a word of support, for your brokerage to prospective clients. Getting a brokerage’s sales culture to the stage where requesting referrals is an automatic process is not easy. Many account executives overlook the value of important clients and underestimate the strength of their support and endorsement.

But, a brokerage can change its sales culture. One way is through ROPE – and to train and practice the art of referrals. We suggest that account executives engage in “low-risk practice.” In this situation, they can rehearse their referral pitch to clients with other members of the brokerage.

Brokerages also have to set realistic targets for the referral process. Begin the process with a few clients in using the reverse referral strategy. Then, aim for 50% of your new business from referrals, then 75%, etc. Every broker will say that the best lead is a referral. Just as importantly, good clients have a way of replicating themselves in a brokerage, leading to higher retention and increased profitability. If brokerages want a better return on their marketing dollar, it is these areas that have to change. The alternative is waiting for the phone to ring.